German house prices won't rise this year and are unlikely to recover until the economy shows clear signs of growth, the association of public mortgage banks (LBS), the nation's leading lenders, said on Tuesday. LBS said a growing mismatch between supply of new homes and demand should lead to a pick-up in prices and rents after a decade of stagnation, but forecasting that turning point was impossible. "Our experts don't see any price increases before the end of the year," LBS association chairman Hartwig Hamm told a news conference. "Shortage (of housing) is not general yet, even though it could become so more quickly than most currently think," he added. The association argued a plunge in supply of new flats and houses should provide support for the market in coming years, forecasting under 250,000 building permits would be issued this year, down from 270,000 in 2004 and official estimates that Germany needs 350,000 new homes a year. "The bottom has not yet been reached for new home building," it said. It said also that forecasts Germany's population was set to plunge in coming decades were not only dubious but bad for confidence, noting similar past projections have been steadily revised up since the country unified in 1990. "Demand at the moment is mainly focused on existing buildings. That means that sooner or later house prices or rents must rise ... but no one can say exactly when," Hamm said. Hamm said evidence suggested property markets were more sensitive to general economic confidence and wage developments than anything else and buyers probably needed two to three years of solid growth to regain confidence. "I'm sure that when confidence recovers, when we get more positive signals from the labour market and about disposable income, then this will change very quickly," said Hamm.